A Bailout May Help the Economy, But Does that Mean It's the Right Thing to Do?

Man, this bailout business has created strange bedfellows. The Democratic leaders of Congress have pushed a measure originally proposed by the Republican president (albeit in a very changed form, but still with the support of the administration), and the Republican House minority leader also supported the legislation, and yet, the bailout still went down to defeat today, 228-205.

The vote made for strange bedfellows, with 95 Democrats and 133 Republicans teaming up to say "no." (140 Democrats and 65 Republicans supported the bill.) It's not very often that I am sympathetic to the position of 133 House Republicans (and by "not very often," I really mean "virtually never"), so even if the reasons behind the votes differ, I knew I had to take a deeper look at what was bothering me about this whole bailout deal.

After all, it seems pretty clear that while the subprime mortgage crisis was caused by Wall Street recklessness in an environment of deregulation, a policy urged by Republicans and tolerated by Democrats since Ronald Reagan was president, failure to address the current situation could devastate the finances of the average American. Even the esteemed, even-keeled Warren Buffett warned Saturday that if Congress didn't act, there was a risk of "the biggest financial meltdown in American history."

So for the purposes of this discussion, I'm willing to take at face value that the current bailout legislation, which even in its amended form gives unprecedented power to the executive branch and requires the commitment of an enormous amount of taxpayer dollars, is vital to secure the economy. (For now, we will assume that other alternatives, such as the Swedish approach in 1992 that asked more of the banks, or an idea floated in an article on CommonDreams.org that would impose a securities tax to both pay for the past damages and encourage responsible trading in the future, are not going to do the trick, since, realistically, the government is not considering those ideas, regardless of how effective they would or would not be.)

But what I have come to ask myself is, "So what?" Does the imminent meltdown of the financial markets mean, automatically, that the American taxpayers have to bail out the system? While we know that the immediate good could be served by the government putting up $700 billion of taxpayer money to undo the damage done by Wall Street greed, is such an action really in our long-term national interests?

As I've written before, I'm a strong believer in the idea that an electorate gets the government it deserves. The current economic crisis did not come about in a vacuum. Rather, the need for Congressional intervention was the always-inevitable result of a policy of rampant deregulation. So this crisis isn't something that was suddenly thrust on the American people out of nowhere. Rather, by electing politicians that espoused the system that collapsed, the U.S. electorate also has to take responsibility for the mortgage meltdown.

A part of me feels like if the government now steps in to bail out Wall Street, it will mean that both the financial industry (which behaved in such a manner to foist the current crisis upon us) and the voters will be spared having to suffer the consequences of their actions. So what is to stop the same kind of greed from taking over in the future? Where is the deterrence?

And more importantly, where is the remorse of those responsible for the meltdown? Where do you see the guilty parties taking responsibility for their actions? Even as the bailout was being debated last week, you still heard from a lot of Republican members of the House and Senate who were supporting the concept of a bailout that oversight should be limited so as not to impede Wall Street's ability to prosper. After our economy was pushed to the abyss, they were still fervently clinging to their deregulation Kool-Aid. They were still defending the very policy that had allowed the financial meltdown they were seeking to address. I can't help but feel like the message of why this all happened and how damaging it has been to the country hasn't gotten through to these people.

Sometimes I think, maybe, just maybe, the only way for the politicians, and even more so the electorate, to understand that a more civic-minded approach to governing is needed would be for the full force of the Bush/McCain view of the world to be thrust on the country. Maybe Americans need to connect the dots directly, so that they vividly see with their own eyes that the policies of the elected leaders they supported have directly led to the unemployment, lack of credit, loss of retirement accounts, bank failures, etc. that they would be experiencing (if Buffett is right). Maybe it would foster an aversion to the kind of get-rich-quick, something-for-nothing, support-corporations-over-people approach to governing that has reigned in recent years.

I'm not prepared to say for sure that Congress should turn a blind eye to the economic crisis and say, "You guys made your coffins, now lay in them." But that doesn't mean that we are not losing a big piece of our democracy when we allow the government to socialize $700 billion worth of Wall Street mistakes, and, as importantly, allow the sins and greed (and the governing policy that allowed them to occur) that led to the current crisis to effectively go unpunished. It really is a damned-if-we-do, damned-if-we-don't situation. The taxpayers will pay dearly if Congress doesn't act, but that doesn't mean there won't be a price, perhaps different but possibly equally high, if the government does bail out Wall Street. It's just a matter of which loss you want to accept.

And maybe that' s why a big part of me just wishes that Wall Street is left to solve (or not) its own mess. Yeah, I know that people would be hurt, and I would hardly be happy with that. But, again, maybe we would be better off in the long run, with a better understanding of the importance of governing the right way.

There has to be consequences for actions. Without them, a society can't function. If Congress manages to overcome today's setback and pass a Wall Street bailout this week, those who have profited from advocating a system that was always destined to implode will, in the end, pay no price for their actions. The American taxpayers will be picking up the bill, instead. And that, to me, is a dangerous thing, maybe as bad as the potential financial meltdown Buffett has warned about.

Comments

[tbone99]

Maybe we should use the logic of the repugs themselves - welfare is a free ride- let bankers learn a little fiscal responsibility. I have seen so many go down due to the self interst of the super rich. We really don't have much farther to fall.

For all my friends and relatives who died because they got sick before retirement, losing their jobs and then their health care, where was the so called "nanny state.?"I'm sure their stories are multipied a million times over in every state of the union.And for my friends and relatives who were laid off once they hit a decent hourly,but were offered their jobs back at minimum wage .
And those who's companies sold using their pensions as company assets. to entice buyers.
This ones for you - let her burn
No "compassionate conservative" went on tv , pleading for them.

let the WH light bill go.. Put Bush to work shredding documents by hand- it'll keep him busy til Jan 20th.

[lumber]

C'mon Mitchell. If we did the 'right thing' we'd be looking back on an impeachment several years ago.

[tbone99]

We's be eating the rich instead of beans.

[RTIII]

Your title question, "A Bailout May Help the Economy, But Does that Mean It's the Right Thing to Do?", the answer is clearly no.

And I see that you come to that conclusion. However, I'm concerned with this sentence: "So for the purposes of this discussion, I'm willing to take at face value that the current bailout legislation, which even in its amended form gives unprecedented power to the executive branch and requires the commitment of an enormous amount of taxpayer dollars, is vital to secure the economy."

Please do not do so. "Face value" doesn't belong in a dialogue that begins with a proposal by Junior's administration. I see this as an attempted theft, in broad daylight...

I do, however, appreciate the more sensible pause to reason that your article represents - most people aren't even willing to question the need or relative merit of the buyout and want to merely argue over the "protections", etc. Window-dressing.

Don't forget the devaluation effect of a buy-out, too.
..

[cpolevoy]

OPTIONS ARE FEW, NO WHINING ZONE

We must stop the flood of home foreclosures, at least among people that can actually afford reasonable payments. THAT was one of the intentions of EESA. It was in the bill! If you took the time to read it. For a 110-page bill, it was actually a fast read.

If we put a halt to foreclosures, home prices will stabilize. The authorities acting under EESA would then be able to more effectively value the mortgage instruments that they would be investing in.

And if you are opposed to EESA for any or all of the circulating reasons - Wall Street bailout (not true), no taxpayer protections (not true), no CEO compensation restrictions (not true), no oversight (not true), an expenditure and not an investment (not true), and oh yes, no assistance for homeowners (not true), and finally no equity interests for taxpayers (not true), you are opposed to EESA for all the wrong reasons.

Many Republicans would like to take the $700 billion, or some sum, and just invest it in the troubled banks. Talk about government interfering in free market capitalism! They can't have it both ways. But doesn't that say all that needs to be said about conservative Republicans and their inability to actually govern?

Time's Up. Options are few, no whining. clearthemi­st.blogspo­t.com

[AngryOhioan]

"We must stop the flood of home foreclosures, at least among people that can actually afford reasonable payments."

Why should people who refuse to make their mortgage payments get to keep the house they didn't pay for? Nobody held a gun to these people's head and made them take out loans they couldn't afford to repay. Didn't these people read the agreements? Why should honest responsible people have to pay to put irresponsible people in houses they don't want to pay for?
I don't have a problem with trying to stop the damage to the wider economy but the solution is not to try and reinflate the housing bubble. The solution is to recapitalize the banks AFTER wiping out the shareholders and boldholders so that they learn their lesson too. Let the people who made bad choices take the losses.

[shawnaNaustin]

I hear ya, Angry. But when homeowners who HAVE been dutifully paying their mortgages are affected by plummeting home values because so many in their neighborhoods have defaulted on their loans, who's bad choices are THEY paying for? It's a simple problem in theory, but a complex problem in reality. Sadly, we all go down together in this one - whichever way we decide to handle it.

[JacqueItch]

Whythe housingbubble has burst is complex buthas notableExp­lanations. One is theNumber of realtors. TheseFolks constantly droveup askingprices because it was in theirInterest to make a higherAmount on the transaction. ForThem, selling the sameHouse at 500,000 meant twice theCommission the house brought at 250,000. As Veblen would attest, middlemen pushed prices faster than marketconditions dictated. Realestate pricesInflated and noOne intervened. InSympathy, moneylenders continued toLend evenwhen thebuyers were notsecure.

Biggest culprit tothe wholeScenario was devaluation ofthedollar bythe trade deficits and War.
InflatedWorth has also happened to the stockmarket. The government is potentiall­yPowerless to intervene-----if the stockmarket actually beginsto resettle to a morerealistic value, the losses willbe huge. The world willbe affected... thisis what they areTrying NOT to look at, trying NOT toTell the AmericanPublic because theyknow that ifit happens, it is goingto happen severely.

MarketAdjustments likethis wereSupposed NOT toHappen... Those post-1929 controls onlywork in combination with overseeing regulation­s------tak­e away the regulations (as they did starting back in 1980 up to the present) and what happens to stocksandbonds is artificial valuation: the samething that existed in the late 20's, an overpriced and ballooned stockmarket.

This is theFear that Congress is sees. The trillions requiredto restabilize that artificialValue is not inthe treasury. They cannot do anymore than puton a small bandaid and keep thepatient comfortable while hoping thatthe other wounds miraculously healover.

ThomasPaine wrote "He that is the author of a war lets loose the whole contagion of hell and opens a vein that bleeds a nation to death."

[watereddown]

W/O this or a similar bailout package this economy and main street as well will be decimated. We saw only the beginnings yesterday. No one wants to give rich people more money , and in a perfect world these guys/women would get nothing or pay exorbitant fines, but the fact is this crisis ultimately hurts more the average guy than the rich. The rich already have theirs. And it's easy to say "let's just let things unwind naturally" is like saying "lets just let the cancer do whatever it wants to do." The whole system is being eaten away and unfortunately this is the 'best' of the 'worst' solutions. (I do agree the Swedish solution should be looked at more carefully)

[forsunny]

Regarding the latest suggestions to solve this economic crisis from both John McCain and Barack Obama to raise the FDIC limits to help small businesses: Raising the FDIC limit from 100,000 will only let people be less cautious with their money thus continuing funneling it to banks that have a high rate of risky investments resulting in more failures and a greater burden on the FDIC and eventually the tax payer. It is a bad idea to raise the FDIC limits to $250,000. The govt. should directly inject money for loans to businesses through the responsible banks (local, small, large, CUs etc.) who did not become greedy and do risky investments.

[Pdubya]

"inject money"

If the federal reserve note was real money it may work. but that it is not, it won't. that would devalue our dollar and create hyperinflation and a greater depression.

prosectute on fraud and anti-trust. restitute by making them pay directly into the funds they've raped.

audit the fed, support HR 2755, audit the Presidential Working Group on the economy, and audit the currency trust.

This is Keynesian economics at the end of its rope. The trust is gone (that is a free market principle that can not be managed or regulated)

"Allow me to issue and control a nation's money and I care not who writes its laws!" Amshell Rothschild

[marinara]

only retiring republicans voted for the bill. this is a fact. republicans facing close elections never voted for the bill, with 3 exceptions.

This bill is poison to the nation. Only pols connected to finance, not citizens want the bill. And the corporate-sponsored media.

[divineorder]

Afraid you are wrong about how different the bill ones. Check out Representative Lloyd Doggett of Austin TX on NPR.

http://www.npr.org/templates/story/story.php?storyId=95185077

Says the bill is little changed except in adding of pages of suggestions.

We need a different approach that does not involve taxpayers money to pay for bad decisions. We need to re regulate.

[Pdubya]

Here are two examples of our strange bedfellows: Thank goodness we have them.


http://www.youtube.com/watch?v=S27yitK32ds


http://www.youtube.com/watch?v=YBVB1Uc0nko

[Pdubya]

There are only two parties on the Hill: the complicit and the clueless (save for a few). We were asked to entrust the very makers of this debacle. We are faced now with their politically bigoted scare tactic:
"do nothing". A severe, deep recession will ensue, but it will be relatively short (1-2 years).

A bailout would have been worse. Think what money would have been dumped into the system: Fiat money, created out of thin air. This adds to the destruction of our dollar. A deep, prolongued and catastrophic depression would bring the U.S. to mass subsistance living through hyperinflation.

In the short term, use the free market laws we have on the books: Fraud and Anti-Trust. Prosectute. Restittute and make these criminals pay into our 401k funds. Long term, this still does little.

"Allow me to issue and control a nation's money and I care not who writes its laws!" Amshell Rothschild.

[Pdubya]

While Congress was arguing with the Fed over this $700 Billion, they dumped another $700 billion into system, trying to prop up their ponzi scheme. It is a matter of Keynesian economics being at the end of its lifespan, history proves.

Regulation vs. deregulation (in the government sense) is a mute argument when frameworked within a fiat monetary system. We used to be a savings/pr­oduction/c­reditor nation, tied through brenton-woods to a gold standard. Now we are a consumer/debt based nation - and the credit is not there - The trust is gone. Inflation has taken over to a point of no return.

True free-market principles will always trump managed market mechanisms. To blame the free market is a false paradigm. We've had managed markets, thousands of regulations and regulators - at the calling of lobby and wallstreet and special interests. What has happened is that crooks have exploited free-market principles within a managed market system and now the free market principles are trumping their scheme. Period. Let them go bankcrupt, go to jail.

But what about you and me and our retirements? Make them pay directly into them. Support HR 2755 to Abolish the Federal Reserve and let us begin to return to sound money and constitutional issuance of it. Yes, we need more regulation, but in the right place. Lets audit the Federal Reserve, the President's Working Group on the economy, and the Currency Trust.

[cavegal]

My understanding is that Congress is being inundated with calls from Americans who are against any kind of tax payer bailout. Apparently the ratio of calls was 200 - 1 against the bailout yesterday. A lot of us are calling. I called to say no money for Wall Street. The measure they are trying to pass is like spitting at a Tsunami.

According to the International Bank of Settlements, there is $1,000 Trillion dollars worth of bets on these financial derivatives globally. The entire GDP for the planet is $60 Trillion a year. So a meager $700 Billion is only going to pro long the inevitable. At this stage the healthy companies should be buying up the remaining assets of the companies that are failing like JP Morgan just did with WAMU. Until the dust settles globally, we have no idea anyone's standing till the shake out is complete.

[Pdubya]

Save yourself and educate your neighbor. See my posts above and get Peter Schiff's

"CRASH PROOF"


please.

[Stirner]

Good post! I would imagine you might still remember Dr. Loony? You know the fellow who predicted the meltdown and whose warnings were, when not ignored then ridiculed? Of course, the Sheepies are now being harried and hustled to agree that they must be immediately sheared. They will follow orders, and will buy into that "solution" just as they accepted the lies that put our troops into Iraq.

[davidwayneosedach]

The economic meltdown did not occur overnight. And any bailout program should be carefully reviewed to prevent the type of fraud legislature seems to demand.

[racom]

Today we must insist on comprehensive, proven, enforceable regulations before any other legislation. No money, no buyouts, no deals cut in the back rooms, nothing until after a signed bill that reinstates regulation.